Carley Files For Protection

Developer Owes Nn $3.6 Million

April 06, 1989|By MARK DAVIDSON Staff Writer

The developer that owns River Park Tower in Newport News filed for Chapter 11 on Wednesday, tying up the company's assets while it devises a plan to pay off its 4,000 creditors, including the city of Newport News.

Carley Capital Group, a Wisconsin-based developer, and its two principal partners, James and David Carley, filed the motion for Chapter 11, or reorganization, in response to three Washington-area creditors that were trying to force Carley into bankruptcy.

FOR THE RECORD - Published correction ran Friday, April 7, 1989. An article stated incorrectly that Carley Capital Group, a Wisconsin-based developer that has filed for bankruptcy, owes the city of Newport News $3.6 million. Carley owes the city $3.4 million.

"This is a large, complex case, and people should expect that it could go on for awhile," said Howard Schoenfeld, an attorney representing Carley.

Carley still owes the city $3.6 million for loans associated with the tower. Of that, $1.18 million is for space in the tower's parking garage that Carley is obligated to buy in 1995. Because the city deferred payment on all of the loans, Carley doesn't owe the city anything until 1995.

Wednesday's action is the culmination of a steady decline for the once financially powerful Carley Capital Group. Schoenfeld said it hasn't been determined what the latest development will mean for Carley's future.

It was also unclear what affect the action will have on Carley's debts to Newport News.

City Attorney Verbena M. Askew could not be reached after the motion was filed Wednesday in Madison, Wis. But earlier in the week, in anticipation of Carley's filing for Chapter 11, Askew said the city would "be in line with the rest" of the creditors to make sure it gets its money. Askew also said she would meet with the City Council to discuss options if Carley's assets do become tied up.

Last month, two banks and a communications firm filed petitions in a Wisconsin court asking that Carley be placed into involuntary bankruptcy. The firms said Carley wasn't paying debts as they came due.

Carley had until Wednesday to file a response in one of three ways: do nothing and allow a court-appointed trustee to distribute Carley's assets, contest the petitions or file for Chapter 11.

Carley chose Chapter 11 because it allows the firm to maintain control of its own assets while developing a plan to pay off creditors, Schoenfeld said. He estimated that Carley owes money to 4,000 creditors but said he doesn't know how much money is involved or how long the process will take.

Schoenfeld said Carley will sell some of its projects to pay off some creditors, but the details of the arrangement haven't been determined. He said Carley already was in the process of devising such a plan when the bankruptcy petitions were filed.

Newport News hired Carley to develop its ambitious Newport Centre downtown redevelopment plan in the early 1980s. By 1985 the plan became too costly, and the city abandoned it after Carley had built just one project, the 17-story River Park Tower condominiums.

Less than two weeks ago, Carley lost its breach-of-contract lawsuit against Newport News. The suit asked for more than $12 million, claiming that the city had failed to carry out its obligations on Newport Centre.